Fell unaware if shareholders knew of debt deadline

Former Allco Finance director
Gordon Fell
was not aware if shareholders were informed of a pending $42 million debt repayment deadline when they were asked to approve the acquisition of Rubicon Group, the Federal Court heard yesterday.

Dr Fell was quizzed about the 2007 deal in which Allco paid $276 million for Rubicon as the global financial crisis started to gain momentum.

Dr Fell was a director of both companies at the time and Allco chairman
David Coe
was Rubicon investor. Both men walked away from the deal with millions of dollars in cash . Allco later collapsed, owing creditors $1.1 billion.

John Sheehan, SC, representing receivers to the group, said documents showed that at the time of the deal a “significant number" of Rubicon’s related interests needed to be refinanced.

These included a loan facility of $42 million to National Australia Bank by December 2007 – the same month Allco shareholders voted to acquire Rubicon. Various refinancing options had been explored, including extending an existing debt facility with Allco.

When asked if he was aware of Allco shareholders being notified about Rubicon’s impending cash needs, Dr Fell said: “Privilege, not to my knowledge", although the matter had been raised with Allco executives.

Dr Fell said he “couldn’t recall" whether accounting practices had changed during 2007 that made Rubicon appear more profitable, and he could not explain why the change had been made.

Mr Sheehan said a change in accounting practices caused “a significant negative outcome for the year [2007] to become a significant positive outcome".

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He also asked about a KPMG valuation of Rubicon in early 2007, which valued the company well below its ultimate sale price later that year.

Mr Sheehan asked whether the opposite should be true, given there was a greater awareness of the financial crisis later in the year and “if anything, its suggestion of future maintainable earnings would have been too rosy".

Dr Fell said the first half of 2007 was a “very active" time for the business and the valuation was out of date. The valuation had also been carried out to explore an employee incentive program, and had it been done with a view to selling the company it may have been lower.

He said he also wasn’t aware of Allco shareholders being notified that Credit Suisse was both a major lender to Rubicon and advising Allco on the deal to buy Rubicon but that this was market knowledge.

Questions will continue on Monday with former Allco chairman David Coe to follow.